Correlation Between Phonex and Redbubble

Can any of the company-specific risk be diversified away by investing in both Phonex and Redbubble at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Phonex and Redbubble into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Phonex Inc and Redbubble Limited, you can compare the effects of market volatilities on Phonex and Redbubble and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Phonex with a short position of Redbubble. Check out your portfolio center. Please also check ongoing floating volatility patterns of Phonex and Redbubble.

Diversification Opportunities for Phonex and Redbubble

-0.18

Correlation Coefficient

Phonex  Redbubble

Good diversification

The 3 months correlation between Phonex and Redbubble is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Phonex Inc and Redbubble Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Redbubble Limited and Phonex is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Phonex Inc are associated (or correlated) with Redbubble. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Redbubble Limited has no effect on the direction of Phonex i.e., Phonex and Redbubble go up and down completely randomly.

Pair Corralation between Phonex and Redbubble

Given the investment horizon of 90 days Phonex Inc is expected to generate 1.07 times more return on investment than Redbubble. However, Phonex is 1.07 times more volatile than Redbubble Limited. It trades about 0.05 of its potential returns per unit of risk. Redbubble Limited is currently generating about -0.02 per unit of risk. If you would invest  117.00  in Phonex Inc on December 27, 2024 and sell it today you would earn a total of  6.00  from holding Phonex Inc or generate 5.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Phonex Inc  vs.  Redbubble Limited

Phonex Inc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Phonex Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, Phonex demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Redbubble Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Redbubble Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's fundamental drivers remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Phonex and Redbubble

The main advantage of trading using opposite Phonex and Redbubble positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Phonex position performs unexpectedly, Redbubble can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Redbubble will offset losses from the drop in Redbubble's long position.

The idea behind Phonex Inc and Redbubble Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.